Allied Products Maintains a Large Inventory

question 164

Multiple Choice

Allied Products maintains a large inventory. The company has used the LIFO inventory method for many years, during which the purchase costs of its products have risen substantially. (More than one of the following answers may be correct.)

• A) Allied would have reported a higher net income in past years if it had been using the average cost method.
• B) Allied's financial statements imply a lower inventory turnover rate than they would if the company were using FIFO.
• C) If Allied were to let its inventory fall far below normal levels, the company's gross profit rate would decline.
• D) Allied would have paid more income taxes in past years if it had been using the FIFO method.

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Definitions:

Buying Process

The series of steps a consumer goes through before purchasing a product or service, from recognizing a need to making the purchase decision.

Buying Center

A group of individuals within an organization who are involved in the process of evaluating and making purchase decisions.

Buying Center

A collection of people in an organization involved in the process of deciding to buy products or services.

Organizational Culture

The set of shared values, beliefs, practices, and norms that characterizes an organization and influences its functioning.